Increasing Your Credit Score with Credit Cards

May 8, 2012 - Howie

The most comment myth about applying for credit cards that we need to get past is “applying for credit cards will ruin my credit”. It just isn’t true.

Here’s the truth:

Applying for a credit card or loan will result in a “hard inquiry” to one or many credit bureaus which will negatively impact your credit score 2 to 5 points
The impact of these inquiries fall off over time … meaning: When you apply for a credit card or loan, within the first 30 days you may see a 5 point hit against your score. 90 days after application (with all other things equal on your credit) you may see your score creep back up 1 point. 180 days out it may go up again. Over the course of 24 months the negative impact of that inquiry will be completely gone.
When you have that new line of credit you’ll have an opportunity to INCREASE your score as you’ll now have the ability to:

Establish additional successful / on-time payment history
Prove your trustworthiness with additional credit and proper use of it (utilization)
Increase your credit depth (how long you have accounts)
Availability of credit (If a creditor has trusted you with credit previously you have an established relationship with them that you can use to secure additional credit if needed)

Your credit IS one of your most important assets. If you cannot pay your bills in full every month you should not be applying / seeking additional credit.

One of our readers Avi put together some notes and screenshots from his applications across the past year and a graph of his credit score as it actually INCREASED throughout his applications and an application for a mortgage. Read on …

Rick,
I have been reading your blog for a while and know for the fact its hard to get people interested in credit card applications. I travel for a living and had a hard time to get my colleagues to understand about the credit cards applications. A part of me broke inside when someone from office used 80k miles to fly domestic. Anyways here’s the latest info I sent them and thought your readers might be interested too. (These are the cards that Avi applied for and was approved for):

Apart from the 560k miles and points from credit cards, I did get 100k from grand slam, about 150k miles from travel (last yr was slow, did 250k dl mqm in 2010) and about 150k hilton and 70k spg. Oh you must also be wondering why I did only a few credit cards last year. Well I took a 5 month break to get ready to apply for a mortgage (scored a 3.75% 30 yr fixed) and then applied again. Hope it helps a few readers with their travel dreams.

Have a good one!

Avi also sent over a screenshot from CreditKarma showing how his credit score INCREASED throughout his applications.

I don’t want this to serve as a message saying “apply for credit cards, it will make your credit increase”, that isn’t the point. Even with Rick’s perfect 990 VantageScore he was still initially declined on a Bank of America Virgin America card. I want to make sure we all understand the facts with an example other than Rick, or myself, or Shannon or Andrew, that by properly using your credit you can indeed increase your score AND see the world at prices we can afford.

Myth: applying for credit cards will ruin my credit … BUSTED.

For today’s Deal of the Day ExpertFlyer is donating One Year of Premium service ($100 value) for the best overall travel deal submitted. A great mileage run, mistake fare, partner promo, new card sign-up offer, or the special twist you figured out on a deal today. Add it to the comments section of this post (along with your First Name, Last Initial, and Airport Code) or this afternoon’s Deal of the Day post to be eligible to win.

thrashsoundly

If you have an upcoming trip planned to Las Vegas, you can book a reward nights at the Venetian or Palazzo hotels through Priority Club for 50% of the regular points price today only. 25K for a room in a fancy Vegas hotel – not too shabby!

Oao

Thanks for the heads up, I got excited until I found out its for limited dates in june july and august.

Loweeel

I just got a flyer in the mail last night informing me that my BA Visa was automatically signed up for 2.5 bonus Avios/$ of spend from now through 7/31/12, up to $4000 in spend during that period (10000 bonus Avios points). Fine print — doesn’t apply to any spend that earns 2.5 Avios or more per dollar.

Lowell J. — EWR
http://twitter.com/BrianKlick Brian Klick

Just a note on the graph – it’s not really accurate because this person only appeared to measure their credit score 2-3 times in more than a year. It would be much more accurate if they did it every month, and then you could see the ups and downs as a result of the applications.
Rustin

Travelocity is offering $25 a 2-night hotel stay between May 7, 2012 and December 31, 2012 with code “FBFAN”, no minimum spend required.
Abby S

Club Carlson’s “Big Night” promotion is coming back and it’s better than ever. Register next Monday, then 1 stay at a Radisson will net 50,000 points, PLUS 1 stay at a Country Inn and Suites will net 44,000 points, and 1 stay at a Park Inn will get another 44,000 points. This is stackable (see ), so with 3 cheap stays you can earn 138,000 points — enough for 1 free night at a top-tier Radisson Blu plus 2 nights at the next highest tier! http://boardingarea.com/blogs/mommypoints/2012/05/07/club-carlson-big-night-promos-are-stackable-up-to-138000-points/

Abby S — DCA
Wise2u

The MYTH is that credit works the same for everyone. It is so individualized that nobody can figure out exactly how FICO scores are determined. It is based on many variables. To make a blanket statement that applying for multiple credit cards doesnt hurt, and cant ruin your credit, is very ignorant.
There are forums devoted to credit as big as some of the major travel forums. So stick to the travel advice or do a little research on those forums before you spread misinformation.
One big downside of the popular trend of applying for many cards at once is the dramatic increase in available credit after an app-o-rama, not only is it a red flag, but after a couple of those every credit agency will note “too many applications” “account age average too short” these are negatives that take more than a year to get adjusted. In most cases, it is better to space applications out, than make 6 in a day, even if you avoid a double pull by one bank by applying for two of their cards. The best advise is to research the credit forums like you would the travel forums before you make a mistake that will hurt your credit either short or long term

http://www.facebook.com/sunk818 sunk818

The MYTH is that credit works the same for everyone. It is so individualized that nobody can figure out exactly how FICO scores are determined.
http://www.facebook.com/sunk818 sunk818

> It is so individualized
I’d like to call BS on this statement. A FICO score is an algorithm which means there is a formula based on data that is available on your credit report. Those data points are not unique. They are applicable to anyone that has a credit report. Scoring has to work exactly the same for everyone based on the data points they use to generate the score.

Your initial statement makes me question the rest of what you wrote.
Newyorkeroncl

I agree with you. FICO scoring uses buckets to group people with similiar credit histories together. A different algorithm is used based on the bucket you’re in. So for some, 3 new accounts in 6 months may be too many and for others it may have little effect. Additionally, the scores provided by Credit Karma are not FICOs and are for the most part useless.

Chris G. (DCA)

Club Carlson “Big Night Giveaways” are all independent of each other. You can earn 50,000 points with a stay at a Radisson or Radisson Blu anywhere in the world, then also get 44,000 more points each with a stay at Country Inns and Suites and a stay at Park Inns by Radisson. Total haul can come out to 138,000 Club Carlson points from this promo! Considering there are many of these brands in airport locations around the US, you can easily score these points with <$300 all in investment on mattress runs. Many Radisson Blus in Europe are often more than that for a single night, but will only require 50,000 points instead. Free nights at lowere-end properties start at 9000 points. Club Carlson is also very good about status matching, so call them up prior to staying there for this promo (starts May 15) and enjoy some elite benefits as well! If you really want to go all out, get your spouse/significant other involved as well and score a whopping 276,000 points!
George B – PHL

George B – PHL

There’s an unpublished offer for Budget rentals from American. You can get 30% off + triple AA miles! The details are here:
https://www.budget.com/budgetWeb/html/en/partners/partners/AmericanWay.html
Charlotte (TYR)

Sign up all of your credit cards for the dining programs that earn miles. I live in a rural area in Texas that the closest restaurant on anyone’s list is a two hour drive away, but I have earned over 700 miles on American this year by eating out places I travel to (probably would earn more if I paid attention to the list on AAdantage dining). Anyway it is always a nice surprise when I am going to eat out anyway while I am traveling.
http://www.facebook.com/sunk818 sunk818

I think your reader needs to provide more data. Did the person have any debt at the time the credit snapshot was made? How much did their overall credit increase? Do they have other outstanding debts (car, mortgage)? How many hard inquiries did they have previously and now? Like you suggest, I think there are too many variables to make a direct correlation.

Avi

I am the reader who provided the info above. I had about 6k of 0% CC debt (in Jan 2011 and still paying at 0%) on an overall limit of 151k (current) across multiple credit cards. I did not keep track of the hard inquiries all through the year but if my memory serves me right, I had 14 Experian, 8 Equifax and 6 TU inquiries in the middle of last yr.
No car loan. I did get a mortgage as mentioned in the post in Nov’11.

WKM LGA

I applied for the Citi Thank You Premier Visa Card in December for the

50K point offer. I recently saw the offer for the Thank You Premier

Mastercard for 50K thank you points, I applied for this card as well.

I plan on converting the visa card to a Citi Forward card for the 5X

dining points, as none of my other six Citi cards would convert to

that card and I did not think that the Forward card was worth a credit

hit. In the end I will have 100k thank you points, for signing up for

the same card. THere are active Links for the 50 K master or visa

card which allow for you to also qualify for double points on dining

and travel during the first year, making it almost compatible with the

Sapphire Preferred :

http://creditcards.citicards.com/usc/drtv/rewards/Nov2011/spot2/default.htm?BT_TX=1&ProspectID=E85B8500716848748664E6B9724FFA31
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thrashsoundly

Forgot to add my info for the tip earlier: Garrett W. SLC
James Horne

An offer for 10,000 Alaska Airlines FF miles for opening a new checking account with Bank of America. To be eligible, you must have an Alaska Airlines Signature Visa from Bank of America. Here is a link and you should read the fine print to see if this is right for you. This may be a targeted offer, but I am including the link. Must be opening a new checking account.

Quote from the offer: “To receive the 10,000 Bonus Miles you must: (1) open a new Bank of America
personal checking account online or in a banking center with a minimum $500
opening deposit and (2) each calendar month, for the first three months from the
new account opening date, make a payment on your credit card account from your
new personal checking account electronically, for example via Online Banking
Bill Pay, ACH transfer (one-time or recurring) or Pay by Phone.”

Link: http://promotions.bankofamerica.com/alaska150/?cm_mmc=DEP-Affinity-_-email-_-DA24EM0006_learnmore_cta_button_top-_-02217_pop2_alaska

James H. CLT
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Increasing Your Credit Score with Credit Cards

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